Do State Subsidies Increase Corporate Environmental Spending?

38 Pages Posted: 27 Feb 2021

See all articles by Yang Wang

Yang Wang

University of Dundee

Yifei Zhang

Hong Kong Polytechnic University - School of Accounting and Finance

Date Written: August 31, 2020

Abstract

This study investigates the impact of state subsidies on corporate environmental spending of Chinese listed firms between 2011 and 2018, using a hand-collected data from corporate annual and environmental responsibility reports. We find a positive relationship between state subsidies and corporate environment spending, indicating firms receiving government subsidies are more likely to behave more environmentally responsible. In addition, the positive relationships are more pronounced among the non-state-owned enterprises (non-SOEs) and the firms experiencing financial constraints. It is because, non-SOEs are more likely to lose government support comparing to their SOE peers, thus making more efforts to address corporate pollution. Moreover, firms subject to financial difficulties tend to build an environmental responsible image and to contribute more in environment protection.

Keywords: State subsidies, Environmental spending, State-owned enterprises, Financial constraints

JEL Classification: G18, G32, G38, H23, P26

Suggested Citation

Wang, Yang and Zhang, Yifei, Do State Subsidies Increase Corporate Environmental Spending? (August 31, 2020). International Review of Financial Analysis, Vol. 72, No. 101592, 2020, Available at SSRN: https://ssrn.com/abstract=3748260

Yang Wang

University of Dundee ( email )

University of Dundee
1 Perth Road
Dundee, DD1 4HN
United Kingdom

Yifei Zhang (Contact Author)

Hong Kong Polytechnic University - School of Accounting and Finance ( email )

Hung Hom
Kowloon
Hong Kong

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